5 Most Common Reasons Startups Fail to Expand Internationally

For many businesses that are going through rough times at home, the only way out seems the international expansion. Their motives are the wave of globalization and the idea of huge virgin markets of consumers and business partners that can be found overseas. Still, many companies will make the same mistake and go the same paths to disaster as those before them. The only safe way is to learn from the lessons of others in order to avoid a similar fate. If you can stay clear of these five mistakes, your chances to succeed in your international venture will increase dramatically.

Lack of Capital

Some entrepreneurs start a business venture without taking into account funding requirements needed for obtaining key infrastructure and failing to facilitate sufficient cash flow which would fund the day-to-day activities. Besides lacking the capital requirements necessary for running a business, most of the failing business owners haven’t come up with any business plan altogether. You can’t have only 95% of the required business capital. It’s not enough. You need 100%. Of course, smaller companies will need less capital than a large scale retail or transport company.

Early Expansion

This is a common lure for a startup business owners. An early success may get them thinking that they’ve straddled the wave and achieved a winning formula. They might think that this is the right time for setting up a new office, factory, warehouse, or expanding overseas. The truth is that expansions have to be planned carefully and funded generously. In addition, expansion needs infrastructure in both location and equipment perspective and a personal perspective as well. It needs to be supported by a team which is trained to manage the ups and downs of the rapid growth.

Extensive Reliance on Debt Funding

From the moment you take a loan to start a company, you are on so called debt clock. It means that you need to get to the Break-Even-Point as quickly as possible. Failing to do so, may call for further borrowings that will help you stay at the surface. Then you resort to credit cards, seconded by refinancing your family home mortgage. The third in line come your family members, and your friends, up to a point when you simply don’t have from whom to borrow, or interest repayments smother your company’s cash flow.

Infirm Strategic Management

Often times a skilled craftsman will try to set up their own business. But there is a difference between being great in a particular trade and running a company. Being an entrepreneur requires education and grooming, in order to avoid the dead ends and pitfalls.

Lack of Business Plan

There are three key stages for every operation. The first stage is the concept stage, the birth of an idea. The second stage is called basic planning. It outlines the rough directions – where, when and how. The third and the final stage deals with the details.

Unfortunately, most business owners stop planning at the concept stage, which can be devastating for their growth and international expansion specifically. Naturally, if you’re planning to conquer a new market you’ll certainly need more than a rented space and good will. This is especially important if your plans revolve around markets that might have completely different laws regarding running a business, managing finance, etc. Therefore, you’ll need to start learning about your target market early, if you want to achieve success. For example, Singapore is often regarded as the best country to run a business (getting loans and tax registration processes are quite simple) and the first step to getting there is to find resources that will explain you how to set up a company in Singapore.

Similarly, most other regional markets will require you to take specific legal steps, which is why you need a detailed plan prepared months or even years in advance. Of course, this needs to be documented as a part of the business plan, as well as the overall success strategy for your company.